AMENDMENT NO. 1 TO DIRECTOR INDEXED COMPENSATION BENEFITS AGREEMENT
Exhibit
10.27
AMENDMENT NO. 1
TO
This
Amendment, made and entered into by and between Heritage Bank of Commerce, a
bank chartered under the laws of the State of California (the “Bank”), and Xxxxx
X. Xxxxxxxxx, an individual residing in the State of California (the
“Director”), amends certain provisions of the Director Indexed Compensation
Benefits Agreement dated June 19, 1997 between the Bank and the Director (the
Agreement) for the purposes set forth hereinafter.
RECITALS
WHEREAS,
the Bank’s accountants, Deloitte & Touche LLP, have notified the Bank of a
change in the accounting treatment accorded to the Index Benefits under the
Agreement, which increases the benefits expense to the Bank;
WHEREAS,
the Bank and the Director have agreed to delete the Index Benefits and
substitute a defined benefit payable during the Directors life in order to (a)
reduce the benefit expense increase caused by the change in accounting
treatment, and (b) maintain, to the extent feasible, a benefit entitlement which
is substantially equivalent, but mot in excess of the projected Index Benefits
under the Agreement; and
WHEREAS,
it is the intent of the Bank and the Director that this Amendment be effective
as of October 21, 1999, and except as amended herein, the terms and conditions
of the Agreement shall remain in full force and effect.
NOW,
THEREFORE, in consideration of the services to be performed by the Director in
the future, as well as the mutual promises and covenants contained herein, the
Bank and the Director agree as follows:
AGREEMENT
1. The
Agreement is hereby amended as follows:
a. The terms
“Index”, “Indexed” and “Index Benefit”, whether plural or singular, and all
references to payments related thereto as set forth in the Agreement and
Schedules thereto, are hereby deleted.
b. All
provisions in the Agreement which refer in any manner to payment or distribution
of Director Benefits following the Directors death to a “beneficiary” or
“designated beneficiary”, “Surviving Spouse' or “spouse”, “qualified personal
representative”, “executor”, “administrator”, or “Director's estate”, along with
any definitions of such terms, and Schedule C, are hereby deleted.
c. The
portion of subparagraphs 3.1, 3.2, and 4.2 which reads as follows: “...payable
(i) for the period designated in Schedule “D” in the case of the balance in the
Benefit Account and (ii) until the Director's death in the case of the Index
Benefit defined in Schedule “B”, is hereby deleted from each such subparagraph
and a period inserted in lieu of the comma at the end of the text remaining
after such deletions.
d. The term
“Employer” used in subparagraphs 3.2, 5.1, 5.2 and 5.4 is amended to read
“Bank”.
e. The last
sentence of subparagraphs 5.1, 5,2, and 5.4 which reads as follows: “The
installments shall be payable (i) for the period designated in Schedule “D” in
the case of the balance in the Benefit Account and (ii) until the Executive's
death in the case of the Index Benefit defined in Schedule “B”, is hereby
deleted from each such subparagraph.
f. Subparagraphs
3.3 and 4.1 are hereby deleted and subparagraph 4.2 is substituted in lieu of
Paragraph 4.
g. An
amended Schedule B in the form attached hereto as Exhibit 1 and incorporated
herein by this reference replaces and supersedes the prior Schedule B in the
Agreement.
h. Schedule
D is hereby deleted.
i. All
references to provisions of the Agreement which have been amended hereby are
themselves hereby amended to conform to such amended provisions.
j. Except as
amended hereby, the Agreement remains in full force and effect as of the date
thereof.
BANK DIRECTOR
HERITAGE
BANK OF
COMMERCE
By:____________________________
____________________________
Xxxx X.
Xxxxxxx
Xxxxx X. Xxxxxxxxx
President and CEO
Dated: _____________, 2000 Dated: _______________,
2000
SPOUSAL
CONSENT
I,
Xxxxxxxx X. Xxxxxxxxx, being the spouse of Xxxxx X. Xxxxxxxxx, after being
afforded the opportunity to consult with independent counsel of my choosing, do
hereby acknowledge that I have read, agree and consent to the foregoing
Amendment No. I to the Director Indexed Compensation Benefits Agreement between
the Bank and my spouse. I understand that Amendment No. I to the Agreement may
affect certain rights which I may have in the benefits provided for under the
terms of the Agreement and in which I may have a marital property
interest.
Dated: ______________, 2000 _______________________________
Xxxxxxxx X.
Xxxxxxxxx
SCHEDULE
B
DIRECTOR
BENEFITS
A benefit
account shall be established as a liability reserve account on the books of the
Bank for the benefit of the Director. The Director Benefits shall be credited to
the benefit account in an amount equal to One Thousand Dollars ($1,000.00) per
year for each year of service as a member of the Board of Directors of the Bank.
The amount of Director Benefits payable under the Agreement shall be increased
at the rate of two percent (2%) each year from the date of commencement of
payments of the Director Benefits until t
This
Agreement is made and entered into effective as of June 19, 1997 by and between
Heritage Bank of Commerce, a bank chartered under the laws of the State of
California (the “Bank”), and Xxxxx X. Xxxxxxxxx, an individual residing in the
State of California (the “Director”).
R E C I T A L S
WHEREAS,
the Director is a member of the Board of Directors of the Bank and has served in
such capacity since June 8, 1994, the approximate date of the Bank’s
organization;
WHEREAS,
the Bank desires to establish a compensation benefit for directors who are not
also officers or employees of the Bank in order to attract and retain
individuals with extensive and valuable experience as directors;
and
WHEREAS,
the Director and the Bank wish to specify in writing the terms and conditions
upon which this additional compensatory incentive will be provided to the
Director, or to the Director’s spouse or designated beneficiaries, as the case
may be.
NOW,
THEREFORE, in consideration of the services to be performed by the Director in
the future, as well as the mutual promises and covenants contained herein, the
Director and the Bank agree as follows:
AGREEMENT
1. Terms and
Definitions.
1.1 Administrator. The
Bank shall be the “Administrator” and, solely for the purposes of ERISA as
defined in subparagraph 1.9 below, the “fiduciary” of this Agreement where a
fiduciary is required by ERISA.
1.2 Applicable
Percentage. The term “Applicable Percentage” shall mean that
percentage adjacent to a calendar period listed on Schedule “A” attached hereto,
which percentage shall remain in effect until an adjustment occurs on each
succeeding calendar period during the term of service as a member of the Board
of Directors of the Bank. Notwithstanding the foregoing or the
percentages set forth on Schedule “A,” but subject to all other terms and
conditions set forth herein, the “Applicable Percentage” shall be: (i) provided
payments have not yet begun hereunder, one hundred percent (100%) upon
termination of service described in subparagraph 5.4 pursuant to a “Change in
Control” as defined in subparagraph 1.4 below, or the Director’s death, or
Disability as defined in subparagraph 1.6 below, which death or Disability
occurs prior to termination of service; and (ii) notwithstanding subclause (i)
of this subparagraph 1.2, zero percent (0%) in the event the Director takes any
intentional action which prevents the Bank from collecting the proceeds of any
life insurance policy which the Bank may happen to own at the time of the
Director’s death and of which the Bank is the designated
beneficiary. Furthermore, notwithstanding the foregoing, or anything
contained in this Agreement to the contrary, in the event the Director takes any
intentional action which prevents the Bank from collecting the proceeds of any
life insurance policy which the Bank may happen to own at the time of the
Director’s death and of which the Bank is the designated beneficiary: (1) the
Director’s estate or designated beneficiary shall no longer be entitled to
receive any of the amounts payable under the terms of this Agreement, and (2)
the Bank shall have the right to recover from the Director’s estate all of the
amounts paid to the Director’s estate (with respect to amounts paid prior to the
Director’s death or paid to the Director’s estate) or designated beneficiary
(with respect to amounts paid to the designated beneficiary) pursuant to the
terms of this Agreement prior to and after the Director’s death.
1.3 Beneficiary. The
term “beneficiary” or “designated beneficiary” shall mean the person or persons
whom the Director shall designate in a valid Beneficiary Designation, a copy of
which is attached hereto as Schedule “C,” to receive the benefits provided
hereunder. A Beneficiary Designation shall be valid only if it is in
the form attached hereto and made a part hereof, completed and signed by the
Director and is received by the Administrator prior to the Director’s
death.
1.4 Change in
Control. The term “Change in Control” shall mean the
occurrence of any of the following events with respect to the Bank (with the
term “Bank” being defined for purposes of determining whether a “Change in
Control” has occurred to include any parent bank holding company organized at
the direction of the Bank to own 100% of the Bank’s outstanding common stock):
(i) a change in control of a nature that would be required to be reported in
response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the
Securities Exchange Act of 1934, as amended (the “Exchange Act”), or in response
to any other form or report to the regulatory agencies or governmental
authorities having jurisdiction over the Bank or any stock exchange on which the
Bank’s shares are listed which requires the reporting of a change in control;
(ii) any merger, consolidation or reorganization of the Bank in which the Bank
does not survive; (iii) any sale, lease, exchange, mortgage, pledge, transfer or
other disposition (in one transaction or a series of transactions) of any assets
of the Bank having an aggregate fair market value of fifty percent (50%) of the
total value of the assets of the Bank, reflected in the most recent balance
sheet of the Bank; (iv) a transaction whereby any “person” (as such term is used
in the Exchange Act) or any individual, corporation, partnership, trust or any
other entity becomes the beneficial owner, directly or indirectly, of securities
of the Bank representing twenty-five percent (25%) or more of the combined
voting power of the Bank’s then outstanding securities; or (v) a situation
where, in any one-year period, individuals who at the beginning of such period
constitute the Board of Directors of the Bank cease for any reason to constitute
at least a majority thereof, unless the election, or the nomination for election
by the Bank’s shareholders, of each new director is approved by a vote of at
least three-quarters (3/4) of the directors then still in office who were
directors at the beginning of the period.
Notwithstanding
the foregoing or anything else contained herein to the contrary, there shall not
be a “Change of Control” for purposes of this Agreement if the event which would
otherwise come within the meaning of the term “Change of Control” involves (i) a
reorganization at the direction of the Bank solely to form a parent bank holding
company which owns 100% of the Bank’s common stock following the reorganization,
or (ii) an Employee Stock Ownership Plan sponsored by the Bank or its parent
holding company which is the party that acquires “control” or is the principal
participant in the transaction constituting a “Change in Control,” as described
above.
1.5 The
Code. The “Code” shall mean the Internal Revenue Code of 1986,
as amended (the “Code”).
1.6 Disability/Disabled. The
term “Disability” or “Disabled” shall mean bodily injury or disease (mental or
physical) which wholly and continuously prevents the performance of duty for at
least three months including, without limitation, the total irrecoverable loss
of the sight in both eyes or the loss by severance of both hands at or above the
wrist or of both feet at or above the ankle or of one hand at or above the wrist
and one foot at or above the ankle.
1.7 Early
Retirement Date. The term “Early Retirement Date” shall mean
the Retirement, as defined below, of the Director on a date which occurs prior
to the Director attaining sixty-two (62) years of age, but after the Director
has attained fifty-five (55) years of age.
1.8 Effective
Date. The term “Effective Date” shall mean the date first
written above.
1.9 ERISA. The
term “ERISA” shall mean the Employee Retirement Income Security Act of 1974, as
amended.
1.10 Director
Benefits. The term “Director Benefits” shall mean the benefits
determined in accordance with Schedule “B”, and reduced to the extent (i)
required under the other provisions of this Agreement, including, but not
limited to, Paragraphs 5, 6 and 7 hereof; (ii) required by reason of the lawful
order of any regulatory agency or body having jurisdiction over the Bank; or
(iii) required in order for the Bank to properly comply with any and all
applicable state and federal laws, including, but not limited to, income,
employment and disability income tax laws (e.g., FICA, FUTA, SDI).
1.11 Plan
Year. The term “Plan Year” shall mean the Bank’s fiscal
year.
1.12 Retirement. The
term “Retirement” or “Retires” shall refer to the date which the Director
acknowledges in writing to the Bank to be the last day of service as a member of
the Board of Directors of the Bank.
1.13 Surviving Spouse. The
term “Surviving Spouse” shall mean the person, if any, who shall be legally
married to the Director on the date of the Director’s death.
1.14 Removal
for Cause. The term “removal for cause” shall mean termination
of a Director’s service as a member of the Board of Directors of the Bank by
reason of any of the following:
(a) The
willful breach or habitual neglect by the Director of his responsibilities and
duties;
(b) The
Director’s deliberate violation of (i) any state or federal banking or
securities laws, or of the Bylaws, rules, policies or resolutions of the Bank,
or (ii) the rules or regulations of the California Commissioner of Financial
Institutions, the Federal Deposit Insurance Corporation or any other regulatory
agency or governmental authority having jurisdiction over the Bank, which has a
material adverse effect upon the Bank;
(c) The
determination by a state or federal court, banking agency or other governmental
authority having jurisdiction over the Bank, that the Director (i) is of unsound
mind, or (ii) has committed a gross abuse of authority or discretion with
reference to the Bank or (iii) otherwise is not suitable to continue to serve as
a member of the Board of Directors of the Bank;
(d) The
Director’s conviction of any felony or a crime involving moral turpitude or a
fraudulent or dishonest act; or
(e) The
Director’s disclosure without authority of any secret or confidential
information not otherwise publicly available concerning the Bank or taking any
action which the Bank’s Board of Directors determines, in its sole discretion
and subject to good faith, fair dealing and reasonableness, constitutes unfair
competition with or inducement of any customer to breach any contract with the
Bank.
2. Scope, Purpose and
Effect
2.1 Contract
of Employment. Although this Agreement is intended to
provide the Director with an additional incentive to continue to serve as a
member of the Board of Directors of the Bank, this Agreement shall not be deemed
to constitute a contract of employment between the Director and the Bank nor
shall any provision of this Agreement restrict the right of the Bank to remove
or cause the removal of the Director including, without limitation, by (i)
refusal to nominate the Director for election for any successive term of office
as a member of the Board of Directors of the Bank, or (ii) complying with an
order or other directive from a court of competent jurisdiction or any
regulatory authority having jurisdiction over the Bank which requires the Bank
to take action to remove the Director.
2.2 Fringe
Benefit. The benefits provided by this Agreement are granted
by the Bank as a fringe benefit to the Director and are not a part of any salary
reduction plan or any arrangement deferring a bonus or a salary
increase. The Director has no option to take any current payments or
bonus in lieu of the benefits provided by this Agreement.
3. Payments
Upon Early Retirement or Retirement and After Retirement.
3.1 Payments
Upon Early Retirement. The Director shall have the right to
Retire from the Board of Directors on a date which constitutes an Early
Retirement Date as defined in subparagraph 1.7 above. In the event
the Director elects to Retire on a date which constitutes an Early Retirement
Date, the Director shall be entitled to be paid the Applicable Percentage of the
Director Benefits, in substantially equal monthly installments on the first day
of each month, beginning with the month following the month in which the Early
Retirement Date occurs or upon such later date as may be mutually agreed upon by
the Director and the Bank in advance of said Early Retirement Date, payable (i)
for the period designated in Schedule “D” in the case of the balance in the
Benefit Account and (ii) until the Director’s death in the case of the Index
Benefit defined in Schedule “B”.
3.2 Payments
Upon Retirement. If the Director shall continue to serve
as a member of the Board of Directors until attaining sixty-two (62) years of
age, the Director shall be entitled to be paid the Applicable Percentage of the
Director Benefits, in substantially equal monthly installments on the first day
of each month, beginning with the month following the month in which the
Director Retires or upon such later date as may be mutually agreed upon by the
Director and the Employer in advance of said Retirement date, payable (i) for
the period designated in Schedule “D” in the case of the balance in the Benefit
Account and (ii) until the Director’s death in the case of the Index Benefit
defined in Schedule “B”. At the Bank’s sole and absolute discretion,
the Bank may increase the Director Benefits as and when the Bank determines the
same to be appropriate.
3.3 Payments
In the Event of Death After Retirement. The Bank agrees that
if the Director Retires, but shall die before receiving all of the Director
Benefits Payments specified in Schedule “B”, the Bank agrees to pay the
Applicable Percentage of the Director Benefits to the Director’s designated
beneficiary in lump sum. If a valid Beneficiary Designation is not in
effect, then the remaining amounts due to the Director under the terms of this
Agreement shall be paid to the Director’s Surviving Spouse. If the
Director leaves no Surviving Spouse, the remaining amounts due to the Director
under the terms of this Agreement shall be paid to the duly qualified personal
representative, executor or administrator of the Director’s estate.
4. Payments In the Event Death
or Disability Occurs Prior to Retirement
4.1 Payments
in the Event of Death Prior to Retirement. If the Director
dies at any time after the Effective Date of this Agreement, but prior to
Retirement, the Bank agrees to pay the Applicable Percentage of the Director
Benefits to the Director’s designated beneficiary in lump sum. If a
valid Beneficiary Designation is not in effect, then the remaining amounts due
to the Director under the terms of this Agreement shall be paid to the
Director’s Surviving Spouse. If the Director leaves no Surviving
Spouse, the remaining amounts due to the Director under the terms of this
Agreement shall be paid to the duly qualified personal representative, executor
or administrator of the Director’s estate.
4.2 Payments
in the Event of Disability Prior to Retirement. In the event
the Director becomes Disabled at any time after the Effective Date of this
Agreement, but prior to Retirement, the Director shall be entitled to the
Applicable Percentage of the Director Benefits, in substantially equal monthly
installments on the first day of each month, beginning with the month following
the month in which the Director becomes Disabled, payable (i) for the period
designated in Schedule “D” in the case of the balance in the Benefit Account and
(ii) until the Director’s death in the case of the Index Benefit defined in
Schedule “B”.
5. Payments
in the Event Employment Is Terminated Prior to Retirement. As
indicated in subparagraph 2.1 above, the Bank reserves the right to remove or
cause the removal of the Director under certain circumstances, at any time prior
to the Director’s Retirement. In the event that the service of the
Director shall be terminated, other than by reason of death, Disability or
Retirement, prior to the Director’s attaining sixty-two (62) years of age, then
this Agreement shall terminate upon the date of such termination; provided,
however, that the Director shall be entitled to the following benefits as may be
applicable depending upon the circumstances surrounding the Director’s
termination:
5.1 Termination
Without Cause. If the Director’s service as a member of the
Board of Directors of the Bank is terminated for reasons other than as specified
in paragraph 5.3 below, and such termination is not subject to the provisions of
subparagraph 5.4 below, the Director shall be entitled to be paid the Applicable
Percentage of the Director Benefits, in substantially equal monthly installments
on the first day of each month, beginning with the month following the month in
which the Director attains fifty-five (55) yew-s of age or any month thereafter,
as requested in writing by the Director and delivered to the Employer or its
successor thirty (30) days prior to the commencement of installment payments;
provided, however, that in the event the Director does not request a
commencement date as specified, such installments shall be paid on the first day
of each month, beginning with the month following the month in which .the
Director attains sixty-two (62) years of age. The installments shall
be payable (i) for the period designated in Schedule “D” in the case of the
balance in the Benefit Account and (ii) until the Director’s death in the case
of the Index Benefit defined in Schedule “B”.
5.2 Voluntary
Termination by the Director. If the Director’s service as a
member of the Board of Directors of the Bank is terminated by voluntary
resignation, and such resignation is not subject to the provisions of
subparagraphs 5.3 or 5.4 below, the Director shall be entitled to be paid the
Applicable Percentage of the Director Benefits, in substantially equal monthly
installments on the first day of each month, beginning with the month following
the month in which the Director attains fifty-five (55) years of age or any
month thereafter, as requested in writing by the Director and delivered to the
Employer or its successor thirty (30) days prior to the commencement of
installment payments; provided, however, that in the event the Director does not
request a commencement date as specified, such installments shall be paid on the
first day of each month, beginning with the month following the month in which
the Director attains sixty-two (62) years of age. The installments
shall be payable (i) for the period designated in Schedule “D’ in the case of
the balance in the Benefit Account and (ii) until the Director’s death in the
case of the Index Benefit defined in Schedule “B”.
5.3 Termination
by Removal for Cause. The Director agrees that if the
Director’s service as a member of the Board of Directors of the Bank is
terminated by “removal for cause,” as defined in subparagraph 1.14 of this
Agreement, the Director shall forfeit any and all rights and benefits the
Director may have under the terms of this Agreement and shall have no right to
be paid any of the amounts which would otherwise be due or paid to the Director
by the Bank pursuant to the terms of this Agreement.
5.4 Termination
by the Bank on Account of or After a Change in Control. In the
event that the Director’s service as a member of the Board of Directors of the
Bank is terminated in conjunction with, or by reason of; a “Change in Control”,
the Director shall be entitled to be paid the Applicable Percentage of the
Director Benefits, in substantially equal monthly installments on the first day
of each month, beginning with the month following the month in which the
Director attains fifty-five (55) years of age or any month thereafter, as
requested in writing by the Director and delivered to the Employer or its
successor thirty (30) days prior to the commencement of installment payments;
provided, however, that in the event the Director does not request a
commencement date as specified, such installments shall be paid on the first day
of each month, beginning with the month following the month in which the
Director attains sixty-two (62) years of age. The installments shall
be payable (i) for the period designated in Schedule “D” in the case of the
balance in the Benefit Account and (ii) until the Director’s death in the case
of the Index Benefit defined in Schedule “B”.
6. Section
280G Benefits Reduction. The Director acknowledges and agrees
that the parties have entered into this Agreement based upon certain financial
and tax accounting assumptions. Accordingly, with fill knowledge of
the potential consequences the Director agrees that, notwithstanding anything
contained herein to the contrary, in the event that any payment or benefit
received or to be received by the Director, whether payable pursuant to the
terms of this Agreement or any other plan, arrangement or agreement with the
Bank (together with the Director Benefits, the “Total Payments”), will not be
deductible (in whole or in part) as a result of Code Section 280G or other
applicable provisions of the Code, the Total Payments shall be reduced until no
portion of the Total Payments is nondeductible as a result of Section 280G or
such other applicable provisions of the Code. For purposes of this
limitation:
(a) No
portion of the Total Payments, the receipt or enjoyment of which the Director
shall have effectively waived in writing prior to the date of payment of any
fixture Director Benefits payments, shall be taken into account;
(b) No
portion of the Total Payments shall be taken into account, which in the opinion
of the tax counsel selected by the Bank and acceptable to the Director, does not
constitute a “parachute payment” within the meaning of Section 280G of the
Code;
(c) Any
reduction of the Total Payments shall be applied to reduce any payment or
benefit received or to be received by the Director pursuant to the terms of this
Agreement and any other plan, arrangement or agreement with the Bank in the
order determined by mutual agreement of the Bank and the Director;
(d) Future
payments shall be reduced only to the extent necessary so that the Total
Payments (other than those referred to in clauses (a) or (b) above in their
entirety) constitute reasonable compensation for services actually rendered
within the meaning of Section 280G of the Code, in the opinion of tax counsel
referred to in clause (b) above; and
(e) The value
of any non-cash benefit or any deferred payment or benefit included in the Total
Payments shall be determined by independent auditors selected by the Bank and
acceptable to the Director in accordance with the principles of Section 280G of
the Code.
7. Right To
Determine Funding Methods. The Bank reserves the right to
determine, in its sole and absolute discretion, whether, to what extent and by
what method, if any, to provide for the payment of the amounts which may be
payable to the Director, the Director’s spouse or the Director’s beneficiaries
under the terms of this Agreement. In the event that the Bank elects
to hind this Agreement, in whole or in part, through the use of life insurance
or annuities, or both, the Bank shall determine the ownership and beneficial
interests of any such policy of life insurance or annuity. The Bank
further reserves the right, in its sole and absolute discretion, to terminate
any such policy, and any other device used to fund its obligations under this
Agreement, at any time, in whole or in part. Consistent with
Paragraph 9 below, neither the Director, the Director’s spouse nor the
Director’s beneficiaries shall have any right, title or interest in or to any
funding source or amount utilized by the Bank pursuant to this Agreement, and
any such funding source or amount shall not constitute security for the
performance of the Bank’s obligations pursuant to this Agreement. In
connection with the foregoing, the Director agrees to execute such documents and
undergo such medical examinations or tests which the Bank may request and which
may be reasonably necessary to facilitate any funding for this Agreement
including, without limitation, the Bank’s acquisition of any policy of insurance
or annuity. Furthermore, a refusal by the Director to consent to,
participate in and undergo any such medical examinations or tests shall result
in the immediate termination of this Agreement and the immediate forfeiture by
the Director, the Director’s spouse and the Director’s beneficiaries of any and
all rights to payment hereunder.
8. Claims
Procedure. The Bank shall, but only to the extent necessary to
comply with ERISA, be designated as the named fiduciary under this Agreement and
shall have authority to control and manage the operation and administration of
this Agreement. Consistent therewith, the Bank shall make all
determinations as to the rights to benefits under this Agreement. My
decision by the Bank denying a claim by the Director, the Director’s spouse, or
the Director’s beneficiary for benefits under this Agreement shall be stated in
writing and delivered or mailed, via registered or certified mail, to the
Director, the Director’s spouse or the Director’s beneficiary, as the case may
be. Such decision shall set forth the specific reasons for the denial
of a claim. In addition, the Bank shall provide the Director, the
Director’s spouse or the Director’s beneficiary with a reasonable opportunity
for a full and fair review of the decision denying such claim.
9. Status as
an Unsecured General Creditor. Notwithstanding anything
contained herein to the contrary: (i) neither the Director, the Director’s
spouse or the Director’s designated beneficiaries shall have any legal or
equitable rights, interests or claims in or to any specific property or assets
of the Bank as a result of this Agreement; (ii) none of the Bank’s assets shall
be held in or under any trust for the benefit of the Director, the Director’s
spouse or the Director’s designated beneficiaries or held in any way as security
for the fulfillment of the obligations of the Bank under this Agreement; (iii)
all of the Bank’s assets shall be and remain the general unpledged and
unrestricted assets of the Bank; (iv) the Bank’s obligation under this Agreement
shall be that of an unfunded and unsecured promise by the Bank to pay money in
the future; and (v) the Director, the Director’s spouse and the Director’s
designated beneficiaries shall be unsecured general creditors with respect to
any benefits which may be payable under the terms of this
Agreement.
Notwithstanding
subparagraphs (i) through (v) above, the Bank and the Director acknowledge and
agree that upon request of the Director at any time during the term of this
Agreement, a Rabbi Trust (the “Trust”) shall be established upon such terms and
conditions as may be mutually agreeable between the Bank and the Director and
that it is the intention of the Bank to make contributions and/or transfer
assets to the Trust in order to discharge its obligations pursuant to this
Agreement. The principal of the Trust and any earnings thereon shall
be held separate and apart from other funds of the Bank to be used exclusively
for discharge of the Bank’s obligations pursuant to this Agreement and shall
continue to be subject to the claims of the Bank’s general creditors until paid
to the Director or its beneficiaries in such manner and at such times as
specified in this Agreement.
10. Discretion
of Board to Accelerate Payout. Notwithstanding any of the
other provisions of this Agreement, the Board of Directors of the Bank may, if
determined in its sole and absolute discretion to be appropriate, accelerate the
payment of the amounts due under the terms of this Agreement, provided that
Director (or Director’s spouse or designated beneficiaries): (i) consents to the
revised payout terms determined appropriate by the Bank’s Board of Directors;
and (ii) does not negotiate or in anyway influence the terms of proposed
altered/accelerated payout (said decision to be made solely by the Bank’s Board
of Directors and offered to the Director [or Director’s spouse or designated
beneficiaries] on a “take it or leave it basis”).
11. Miscellaneous.
11.1 Opportunity
To Consult With Independent Advisors. The Director
acknowledges that he has been afforded the opportunity to consult with
independent advisors of’ his choosing including, without limitation, accountants
or tax advisors and counsel regarding both the benefits granted to him under the
terms of this Agreement and the (i) terms and conditions which may affect the
Director’s right to these benefits and (ii) personal tax effects of such
benefits including, without limitation, the effects of any federal or state
taxes, Section 280G of the Code, and any other taxes, costs, expenses or
liabilities whatsoever related to such benefits, which in any of the foregoing
instances the Director acknowledges and agrees shall be the sole responsibility
of the Director notwithstanding any other term or provision of this
Agreement. The Director further acknowledges and agrees that the Bank
shall have no liability whatsoever related to any such personal tax effects or
other personal costs, expenses, or liabilities applicable to the Director and
further specifically waives any right for himself or herself, and his or her
heirs, beneficiaries, legal representatives, agents, successors and assigns to
claim or assert liability on the part of the Bank related to the matters
described above in this subparagraph 11.1. The Director further
acknowledges that he has read, understands and consents to all of the terms and
conditions of this Agreement, and that he enters into this Agreement with a fill
understanding of its terms and conditions.
11.2 Arbitration
of Disputes. All claims, disputes and other matters in
question arising out of or relating to this Agreement or the breach or
interpretation thereof, other than those matters which are to be determined by
the Bank in its sole and absolute discretion, shall be resolved by binding
arbitration before a representative member, selected by the mutual agreement of
the parties, of the Judicial Arbitration and Mediation Services,
Inc. (“JAMS”), located in San Francisco, California. In
the event JAMS is unable or unwilling to conduct the arbitration provided for
under the terms of this Paragraph, or has discontinued its business, the parties
agree that a representative member, selected by the mutual agreement of the
parties, of the American Arbitration Association (“AAA”), located in San
Francisco, California, shall conduct the binding arbitration referred to in this
Paragraph. Notice of the demand for arbitration shall be filed in
writing with the other party to this Agreement and with JAMS (or AAA, if
necessary). In no event shall the demand for arbitration be made
after the date when institution of legal or equitable proceedings based on such
claim, dispute or other matter in question would be barred by the applicable
statute of limitations. The arbitration shall be subject to such
rules of procedure used or established by JAMS, or if there are none, the rules
of procedure used or established by AAA. Any award rendered by JAMS
or AAA shall be final and binding upon the parties, and as applicable, their
respective heirs, beneficiaries, legal representatives, agents, successors and
assigns, and may be entered in any court having jurisdiction
thereof. The obligation of the parties to arbitrate pursuant to this
clause shall be specifically enforceable in accordance with, and shall be
conducted consistently with, the provisions of Title 9 of Part 3 of the
California Code of Civil Procedure. Any arbitration hereunder shall
be conducted in San Jose, California, unless otherwise agreed to by the
parties.
11.3 Attorneys’
Fees. In the event of any arbitration or litigation concerning
any controversy, claim or dispute between the parties hereto, arising out of or
relating to this Agreement or the breach hereof, or the interpretation hereof,
the prevailing party shall be entitled to recover from the non-prevailing party
reasonable expenses, attorneys’ fees and costs incurred in connection therewith
or in the enforcement or collection of any judgment or award rendered
therein. The “prevailing party” means the party determined by the
arbitrator(s) or court, as the case may be, to have most nearly prevailed, even
if such party did not prevail in all matters, not necessarily the one in whose
favor a judgment is rendered.
11.4 Notice. Any
notice required or permitted of either the Director or the Bank under this
Agreement shall be deemed to have been duly given, if by personal delivery, upon
the date received by the party or its authorized representative; if by
facsimile, upon transmission to a telephone number previously provided by the
party to whom the facsimile is transmitted as reflected in the records of the
party transmitting the facsimile and upon reasonable confirmation of such
transmission; and if by mail, on the third day after mailing via U.S. first
class mail, registered or certified, postage prepaid and return receipt
requested, and addressed to the party at the address given below for the receipt
of notices, or such changed address as may be requested in writing by a
party.
|
If
to the Bank:
|
Heritage
Bank of Commerce
|
|
|
000 Xxxxxxx Xxxxxxxxx
|
|
|
Xxx Xxxx, Xxxxxxxxxx 00000
|
|
|
Attn: Chairman of the Board
|
|
|
If
to the Director:
|
Xxxxx
X. Xxxxxxxxx
|
|
|
00000
Xxxxxxxxx Xx.
|
| Xxxxx Xxxxxx, XX 00000 |
11.5 Assignment. Neither
the Director, the Director’s spouse, nor any other beneficiary under this
Agreement shall have any power or right to transfer, assign, anticipate,
hypothecate, modify or otherwise encumber any part or all of the amounts payable
hereunder, nor, prior to payment in accordance with the terms of this Agreement,
shall any portion of such amounts be: (i) subject to seizure by any creditor of
any such beneficiary, by a proceeding at law or in equity, for the payment of
any debts, judgments, alimony or separate maintenance obligations which may be
owed by the Director, the Director’s spouse, or any designated beneficiary; or
(ii) transferable by operation of law in the event of bankruptcy, insolvency or
otherwise. Any such attempted assignment or transfer shall be void
and unenforceable without the prior written consent of the Bank. The
Bank’s consent, if any, to one or more assignments or transfers shall not
obligate the Bank to consent to or be construed as the Bank’s consent to any
other or subsequent assignment or transfer.
11.6 Binding
Effect/Merger or Reorganization. This Agreement shall be
binding upon and inure to the benefit of the Director and the Bank and, as
applicable, their respective heirs, beneficiaries, legal representatives,
agents, successors and assigns. Accordingly, the Bank shall not merge
or consolidate into or with another corporation, or reorganize or sell
substantially all of its assets to another corporation, firm or person, unless
and until such succeeding or continuing corporation, firm or person agrees to
assume and discharge the obligations of the Bank under this
Agreement. Upon the occurrence of such event, the term Bank as used
in this Agreement shall be deemed to refer to such surviving or successor firm,
person, entity or corporation.
11.7 Nonwaiver. The
failure of either party to enforce at any time or for any period of time any one
or more of the terms or conditions of this Agreement shall not be a waiver of
such term(s) or condition(s) or of that party’s right thereafter to enforce each
and every term and condition of this Agreement
11.8 Partial
Invalidity. If any term, provision, covenant, or condition of
this Agreement is determined by an arbitrator or a court, as the case may be, to
be invalid, void, or unenforceable, such determination shall not render any
other term, provision, covenant or condition invalid, void or unenforceable, and
the Agreement shall remain in full force and effect notwithstanding such partial
invalidity.
11.9 Entire
Agreement. This Agreement supersedes any and all other
agreements, either oral or in writing, between the parties with respect to the
subject matter of this Agreement and contains all of the covenants and
agreements between the parties with respect thereto. Each party to this
Agreement acknowledges that no other representations, inducements, promises, or
agreements, oral or otherwise, have been made by any party, or anyone acting on
behalf of any party, which are not set forth herein, and that no other
agreement, statement, or promise not contained in this Agreement shall be valid
or binding on either party.
11.10 Modifications. Any
modification of this Agreement shall be effective only if it is in writing and
signed by each party or such party’s authorized representative.
11.11 Paragraph
Headings. The paragraph headings used in this Agreement are
included solely for the convenience of the parties and shall not affect or be
used in connection with the interpretation of this Agreement.
11.12 No Strict
Construction. The language used in this Agreement shall be
deemed to be the language chosen by the parties hereto to express their mutual
intent, and no rule of strict construction will be applied against any
person.
11.13 Governing
Law. The laws of the State of California, other than those
laws denominated choice of law rules, and, where applicable, the rules and
regulations of the California Commissioner of Financial Institutions and the
Federal Deposit Insurance Corporation, shall govern the validity,
interpretation, construction and effect of this Agreement.
IN
WITNESS WHEREOF, the Bank and the Director have executed this Agreement on the
date first above-written in the City of San Xxxx, Santa Xxxxx County,
California.
BANK DIRECTOR
Heritage Bank Of Commerce
By:____________________________
____________________________
Xxxxxxx X. Del
Xxxxxxx
Xxxxx X. Xxxxxxxxx
Chairman of the
Board of Directors
SCHEDULE
A
|
CALENDAR
YEAR
|
APPLICABLE
PERCENTAGE
|
|
June
8, 1994 to June 7, 1997
|
0.00%
|
|
June
8, 1997 to June 7, 1998
|
36.00%
|
|
June
8, 1998 to June 7, 1999
|
48.00%
|
|
June
8, 1999 to June 7, 2000
|
60.00%
|
|
June
8, 2000 to June 7, 2001
|
72.00%
|
|
June
8, 2001 to June 7, 2002
|
84.00%
|
| June 8, 2002 and Thereafter |
100.00%
|
See
subparagraph 1.2 of the Agreement for a definition and discussion of the
Applicable Percent age.
SCHEDULE
B
DIRECTOR
BENEFITS
1. Director Benefits
Determination.
The
Director Benefits shall be determined based upon the following:
a. Benefit
Account:
A Benefit
Account shall be established as a liability reserve account on the books of the
Bank for the benefit of the Director. Prior to the date on which the
Director becomes eligible to receive payments under the Agreement, such Benefit
Account shall be increased or decreased each Plan Year (including the Plan Year
in which the Director ceases to serve as a member of the Board of Directors of
the Bank) by an amount equal to the annual earnings or loss for that Plan Year
determined by the Index (described in subparagraph c below), less the
Opportunity Cost (described in subparagraph d below) for that Plan
Year.
b. Index
Benefit:
After the
date on which the Director becomes eligible to receive payments under the
Agreement, the Index Benefit for the Director for any Plan Year shall be
determined by subtracting the Opportunity Cost for that Plan Year from the
earnings, if any, established by the Index.
c. Index:
The Index
for any Plan Year shall be the aggregate annual after-tax income from the life
insurance contracts described hereinafter as defined by FASB Technical Bulletin
85-4. This Index shall be applied as if such insurance contracts were
purchased on the Effective Date.
Insurance
Company: Canada Life Assurance Company/XX0000000
American
General Life Insurance Company/CM000075SL
If such
contracts of life insurance are actually purchased by the Bank, then the actual
policies as of the dates purchased shall be used in calculations to determine
the Index and Opportunity Cost. If such contracts of life insurance
are not purchased or are subsequently surrendered or lapsed, then the Bank shall
receive and use annual policy illustrations that assume the above described
policies were purchased from the above named insurance company(ies) on the
Effective Date to calculate the amount of the Index and Opportunity
Cost.
d. Opportunity
Cost:
The
Opportunity Cost for any Plan Year shall be calculated by multiplying (a) the
sum of (i) the total amount of premiums set forth in the insurance policies
described above, (ii) the amount of any Index Benefit (described at subparagraph
b above), and (iii) the amount of all previous years after-tax Opportunity
Costs; by (b) the average annualized after-tax cost of funds calculated using a
one-year U.S. Treasury Xxxx as published in the Wall Street
Journal. The applicable tax rate used to calculate the Opportunity
Cost shall be the Bank’s marginal tax rate until the Director’s Retirement, or
other termination of service (including a Change in
Control). Thereafter, the Opportunity Cost shall be calculated with
the assumption of a marginal forty-two percent (42%) corporate tax rate each
year regardless of whether the actual marginal tax rate of the Bank is higher or
lower.
EXAMPLE
INDEX
BENEFITS
|
[n]
End
of
Year
|
[A]
Cash
Surrender
Value
of Life
Insurance
Policy
|
[B]
Index
[Annual
Policy IncomeAn-An-1]
|
[C]
Opportunity
Cost
A0 =
premium
A0+C
n-1x.05x
(1-42%)
|
[D]
Annual
Benefit
B-C
|
Cumulative
Benefit
D+Dn-1
|
|
0
|
$1,000,000
|
-
|
-
|
-
|
-
|
|
1
|
$1,050,000
|
$50,000
|
$29,000
|
$21,000
|
$21,000
|
|
2
|
$1,102,500
|
$52,500
|
$29,841
|
$22,659
|
$43,659
|
|
3
|
$1,157,625
|
$55,125
|
$30,706
|
$24,419
|
$68,078
|
|
Assumptions: Initial
Insurance = $1,000,000
Effective Tax Rate =
42%
One Year US Treasury Yield =
5%
|
|||||
2. Director Benefits
Payments.
The
Director shall be entitled to payment of the Applicable Percentage of (i) the
balance in the Benefit Account in installments upon the terms as specified in
the Agreement, and (ii) the Index Benefit for each Plan Year payable in
installments until the Director’s death.
SCHEDULE
C
BENEFICIARY
DESIGNATION
To the
Administrator of the Heritage Bank of Commerce Director Indexed Compensation
Benefits Agreement:
Pursuant
to the Provisions of my Director Indexed Compensation Benefits Agreement with
Heritage Bank of Commerce, permitting the designation of a beneficiary or
beneficiaries by a participant, I hereby designate the following persons and
entities as primary and secondary beneficiaries of any benefit under said
Agreement payable by reason of my death:
Primary
Beneficiary:
_________________________ _____________________________
____________________
Name Address
Relationship
Secondary
(Contingent) Beneficiary:
_________________________ ______________________________
______________________
Name
Address
Relationship
THE
RIGHT TO REVOKE OR CHANGE ANY BENEFICIARY DESIGNATION IS HEREBY
RESERVED. ALL PRIOR DESIGNATIONS, IF ANY, OF PRIMARY BENEFICIARIES
AND SECONDARY BENEFICIARIES ARE HEREBY REVOKED.
The
Administrator shall pay all sums payable under the Agreement by reason of my
death to the Primary Beneficiary, if he or she survives me, and if no Primary
Beneficiary shall survive me, then to the Secondary Beneficiary, and if no named
beneficiary survives me, then the Administrator shall pay all amounts in
accordance with the terms of my Director Indexed Compensation Benefits
Agreement. In the event that a named beneficiary survives me and dies
prior to receiving the entire benefit payable under said Agreement, then and in
that event, the remaining unpaid benefit payable according to the terms of my
Director Indexed Compensation Benefits Agreement shall be payable to the
personal representatives of the estate of said beneficiary who survived me but
died prior to receiving the total benefit provided by my Director Indexed
Compensation Benefits Agreement.
Dated: June ___,
1997
______________________________
Xxxxx X. Xxxxxxxxx
CONSENT
OF THE DIRECTOR’S SPOUSE
TO
THE ABOVE BENEFICIARY DESIGNATION:
I,
______________ being the spouse of Xxxxx X. Xxxxxxxxx, after being afforded the
opportunity to consult with independent counsel of my choosing, do hereby
acknowledge that I have read, agree and consent to the foregoing Beneficiary
Designation which relates to the Director Indexed Compensation Benefits
Agreement entered into by my spouse effective as of June 19, 1997. I
understand that the above Beneficiary Designation may affect certain rights
which I may have in the benefits provided for under the terms of the Director
Indexed Compensation Benefits Agreement and in which I may have a marital
property interest.
Dated:
June 30, 1997.
| ____________________________ |
| ____________________________ |
|
Type/Print
Name
|
SCHEDULE
D
DISTRIBUTION
ELECTION
Pursuant
to the Provisions of my Director Indexed Compensation Benefits Agreement with
Heritage Bank of Commerce, I hereby elect to have any distribution of the
balance in my Benefit Account paid to me in installments as designated
below:
|
|
______
|
thirty-six
(36) monthly installments with the amount of each installment determined
as of each installment date by dividing the entire amount in my Benefit
Account by the number of installments then remaining to be paid, with the
final installment to be the entire remaining balance in the Benefit
Account.
|
|
|
______
|
sixty
(60) monthly installments with the amount of each installment determined
as of each installment date by dividing the entire amount in my Benefit
Account by the number of installments then remaining to be paid, with the
final installment to be the entire remaining balance in the Benefit
Account.
|
|
|
______
|
one
hundred twenty (120) monthly installments with the amount of each
installment determined as of each installment date by dividing the entire
amount in my Benefit Account by the number of installments then remaining
to be paid, with the final installment to be the entire remaining balance
in the Benefit Account.
|
|
|
______
|
one
hundred eighty (180) monthly installments with the amount of each
installment determined as of each installment date by dividing the entire
amount in my Benefit Account by the number of installments then remaining
to be paid, with the final installment to be the entire remaining balance
in the Benefit Account.
|
Dated:
June _____, 1997
Signed:_____________________________
Xxxxx X.
Xxxxxxxxx
